Reformism and class polarisation in Europe

ALEX CALLINICOS

Europe in the winter of 1999 presents different faces to the world. At the top, the official Europe of national governments and the European Union (EU) is caught up in the usual round of squabbles and scandals--from the Franco-British 'beef war' to the resignation in the face of allegations of corruption of the French finance minister, Dominique Strauss-Kahn--wrapped up in the pompous rhetoric of European construction.

Down below, the picture is very different. Mass discontent with the official Europe of the elites is growing, but it takes contradictory forms. On the one hand, on 16 October, two mass working class demonstrations initiated respectively by the French Communist Party (PCF) and its Italian counterpart, Rifondazione Communista, took place in Paris and Rome. Elsewhere in Europe, the southern Irish boom economy experienced a national nurses' strike, the biggest industrial dispute Ireland has seen since the 1920s. These events reflect the revival of the European workers' movement after the bitter defeats it suffered in the 1980s.

On the other hand, that same month saw two far right ultra-nationalist parties make important breakthroughs in national elections. The Austrian Freedom Party led by Jörg Haider won 22.6 percent of the vote, giving it second place behind the Social Democratic Party. In Switzerland the People's Party also won second place, with 27.2 percent of the vote. Both parties had run vicious racist campaigns against immigrants and asylum seekers. Arguing that these successes reflected a growing national ist groundswell against economic globalisation and supranational organ i sations such as the EU and the United Nations, the US intelligence consultants Stratfor commented that 'Austria and Switzerland seem to us to be an important signal of shifting political forces in the industrial world'.1

How do we make sense of this contradictory picture? Which, if any, of the various forces at work in Europe today--official strategies, workers' resistance, far right reaction--represents the dominant trend? How should socialists respond? This article seeks to address these questions, concentrating on France and Germany in particular.

The 1930s in slow motion

A few years ago, at a somewhat earlier stage of this process, Tony Cliff said that observing the 1990s in Europe was like watching a film of the 1930s in slow motion.

We remember the 1930s today chiefly for three events--the onset of the Great Depression in 1929-1931, Hitler's seizure of power in January 1933, and the outbreak of the Second World War at the end of the decade. These events were, of course, closely connected, but they were not bound together by some iron logic that meant the economic slump led inevitably to fascism and imperialist war.

The Wall Street Crash of October 1929 did indeed usher in the most serious crisis in the history of the capitalist system. World gross domestic product fell by 15 percent, while in the two biggest economies, the US and Germany, it dropped by 29.6 percent and 16.9 percent respectively.2 Economic slump and mass unemployment put enormous pressure on bourgeois political structures that had already been weakened by the First World War and its revolutionary aftermath. The result was a process of social and political polarisation, as vast numbers of both middle and working class people were prepared to consider much more extreme political solutions of both left and right than they would have contemplated previously.

As it happened it was the right, in the shape of the fascists and more traditional authoritarian conservative forces, that emerged victorious from this struggle, as bourgeois democratic regimes toppled like ninepins, particularly in central and eastern Europe.3 But this was the result of a fiercely fought out and protracted struggle between the forces of right and left on a Europe-wide scale. To take the most important case, the National Socialist seizure of power in 1933 was no preordained event, but the result of a gamble by leading elements in the ruling class that they could use the Nazi mass movement to crush the German working class. As Trotsky pointed out at the time, it could have been defeated had the main workers' organisations--the Social Democratic and Communist parties--been prepared to unite against the fascists.4

Even after the terrible defeat suffered by the German labour movement, workers fought back in a series of struggles that could have wrested the initiative from the fascists and the bosses. In February 1934 the attempt of the French right to seize power evoked a united mass response from workers. Out of this came the impetus for the election of a Popular Front government in May 1936 that was swiftly followed the following month by a great wave of mass strikes and factory occupations. That same summer Spanish workers met General Franco's attempt to overthrow the Popular Front government that had been elected there with revolutionary risings.

What prevented these great workers' movements from shifting the balance of forces sharply to the left was the politics of the Popular Front, preached in particular by the Communist parties, which demanded that the class struggle be restrained for fear of scaring off the 'progressive', 'democratic' wing of the bourgeoisie. So the gains made by the June 1936 occupations were soon thrown away, while the Spanish Revolution was crushed, allowing Franco and his fascist allies to rule Spain for a generation. In June 1940, after the Nazi conquest of France, the same parliament that had been elected with a Popular Front majority voted full powers to Marshal Pétain's Vichy collaborationist regime.

To say that Europe in the 1990s resembles the 1930s in slow motion is not to say that history is repeating itself: most obviously, the economic stagnation that continental Europe has suffered over the past decade is much less severe than the Great Depression. Nor is it to predict the same outcome to the present crisis. Rather, as I put it in 1994:

The same ingredients are present today [as were operative in the 1930s]--deep seated economic crisis which puts increasing pressure on the social structures which built up during the boom, crisis also of the political system, class polarisation involving both the growth of the fascist right and greater working class militancy. The pace of development of the crisis along these different dimensions, however, is--as yet--slower than it was in the 1930s.5

Germany and the onset of the crisis

When this analysis was first formulated in the early 1990s, the most important developments supporting it were in Germany and Italy. Reunification in 1990 proved paradoxically to be both the moment when Germany re-emerged as a world power and the beginning of the most serious economic crisis the country has experienced since the 1930s. The roots of this crisis lay much deeper than reunification. Germany and the other major European economies have been suffering a deep seated crisis of profitability and competitiveness, reflected throughout the 1980s in slow growth and high unemployment. Reunification briefly masked these underlying problems as massive state spending aimed at incorporating East Germany into the Federal Republic stimulated a short lived boom. But in late 1991 the Bundesbank, worried about the huge surge in government borrowing required to finance the higher spending, sharply raised interest rates, killing off the boom.6

Given the central economic position German capitalism has occupied in Western Europe since the late 1940s, the result was to transform Germany from a pillar of stability into a disruptive factor within the EU. The destabilising effects were felt first through the currency gyrations of 1992-1993 within the European Exchange Rate Mechanism (ERM), and then in the harsh monetarist convergence criteria won by the Bundesbank in exchange for replacing the Deutschmark with the euro. Throughout the 1990s Germany, and with it the rest of continental Europe, have experienced slow growth, if not outright recession. This contributed to a widespread sense of malaise, of 'Eurosclerosis', reflecting what many commentators and business leaders felt was the failure of the EU to maintain its competitive position compared to a restructured and apparently reinvigorated US capitalism.

The effect of this continent-wide economic crisis was domestic class polarisation. Articulating the fears of a business class that felt under increasing pressure from its rivals in North America and East Asia, Chancellor Helmut Kohl told the German Bundestag in April 1993, 'With ever shorter working hours, rising wage costs, and ever longer holidays, our competitiveness is in danger. The simple fact is that a successful industrial nation cannot allow itself to be organised like a collective leisure park'.7 In other words, the gains German workers had won during the 'long boom' of the 1950s and 1960s were to be sacrificed in order to restore the competitiveness of German capitalism.

This offensive seriously undermined the institutionalised structures of social bargaining between the state, capital and labour that had been a distinctive feature of 'Rhineland capitalism' since the Second World War. Kohl's drive to make workers pay the huge costs of reunification by holding down wages provoked a national public sector workers' strike in April-May 1992 and a rash of smaller scale disputes in the key metal industry in 1992-1994.8 This process of class polarisation involved, however, more than rising working class militancy. Encouraged by a racist climate stirred up by the ruling coalition against asylum seekers, various fascist organisations sought to exploit mass unemployment in both western and eastern Germany. The result was a series of Nazi outrages against foreigners in Rostock, Mölln and Solingen in 1992-1993.

It wasn't simply Germany that was stalked by the spectre of fascism in the early 1990s. The final days of the corrupt and discredited Mitterrand regime in France facilitated the further growth of Jean-Marie Le Pen's National Front. Worse still, the collapse of the post-war Italian parliamentary regime in the Tangentopoli scandal swept to office in May 1994 a coalition headed by the right wing media tycoon Silvio Berlusconi, and including five ministers from the National Alliance, as the fascist MSI had renamed itself. Economic and political crisis was polarising politics to the right as well as the left.

France 1995: the turning point

Developments over the past five years have confirmed this analysis. Indeed, the second half of the 1990s has seen the process of class polarisation develop and deepen in two crucial respects. First, workers have won a number of significant victories. Secondly, and partly as a result, politics in Europe has shifted to the left, bringing social democratic parties to office throughout the EU.

The decisive event in this process is undoubtedly the public sector strikes in France of November-December 1995. The attempt of the new right wing regime of President Jacques Chirac and his prime minister, Alain Juppé, to force through a package of neo-liberal 'reforms' designed to prepare France for the euro provoked the biggest upsurge of the French working class since May 1968. As Jim Wolfreys showed in his excellent article in the last issue of this journal, the strikes and the defeat of the 'Juppé Plan' pushed French society significantly to the left.9

The following comments by three left wing sociologists highlight how the 1995 strikes allowed working class people to recover confidence in their ability to take collective action after the atomisation and despair of the Mitterrand years:

The first achievement of the struggle wasn't the preservation of gains but the defatalisation of the policies pursued for two decades, the conviction that one could fight them successfully. In other words, the first conquest of the strike movement is the strike itself... In the course of its development the mobilised actors experienced their own strength, they realised that it is possible to do 'something else', they discussed problems such as social protection that are supposed to be 'complicated', reserved normally only for specialists. This was a labour of massive and frontal contestation of the unstated defining assumptions of neo-liberalism which overwhelmed everyone taken individually but which enriched itself within the collectivity as it deliberated. In the strikers' general assemblies, speech circulated freely, or better, liberated itself: 'The strike is like champagne; it removes inhibitions'.10

A wave of strikes and other social struggles--for example, by the sans-papiers (immigrants denied official documents)--followed in the wake of autumn 1995. By April 1997 the Parisian daily Libération could declare that 'strikes...are blossoming like mushrooms in the thunderstorm of the crisis'.11 That same month, in yet another desperate gamble, Chirac dissolved the National Assembly. The ploy badly backfired: the 'plural left' coalition of the Socialist, Communist, and Green parties won the legislative elections. This was an astonishing reversal given that only four years earlier the right wing parties had won a landslide victory thanks to popular revulsion against the Socialist Party under Mitterrand. After that earlier defeat the Socialist former prime minister Pierre Beregevoy had shot himself in despair. Now Lionel Jospin rode the wave unleashed by the 1995 strikes back to office.

Faced with this shift to the left, the National Front was thrown into crisis and suffered a damaging split. Meanwhile, at the intellectual and cultural level, the reactionary climate which had set in during the late 1970s with the emergence of the anti-Marxist nouveaux philosophes began to disintegrate. In particular, the renowned sociologist Pierre Bourdieu stepped forward to attack neo-liberalism and to champion the 'social movements' of 1995 and after. Coming after two decades in which leading intellectual figures such as Foucault and Baudrillard had broken with the left and pored scorn on collective action, this was an important shift. As the Trotskyist philosopher Daniel Bensaïd wrote of Bourdieu, in 'turning his symbolic and cultural capital against the dominant discourse of expertise and competence...he re-legitimises a speech of resistance'.12 Bourdieu's interventions contributed to a broader critique of globalisation which, while expressed largely in left reformist terms, represented a sharp break with 'la pensée unique'--the neo-liberal consensus of the 1980s and early 1990s.

The French strikes of November-December 1995 marked a turning point at a European level as well. In their way, they were as significant as the defeat of the British miners' strike of 1984-1985. If the Great Miners' Strike symbolised the ability of ascendant neo-liberalism in the shape of its most aggressive and self confident representative, Margaret Thatcher, to crush even the best organised and most militant workers, the French strikes suggested that a new page was being turned in the history of the Western labour movement. The neo-liberal offensive was provoking a popular reaction capable of unleashing massive social struggles out of which working class militants could begin to rebuild organisationally and politically from the defeats of the 1980s.

Europe swings left

If France was the high point, there were other important struggles elsewhere. The Berlusconi coalition, for example, evoked a huge response from the Italian working class. In December 1994 a general strike shut the country down, and an enormous trade union demonstration swept over Rome. Faced with this resistance, the government rapidly disintegrated.

In Germany the Kohl government's offensive ran into the ground. In September 1996 the ruling conservative-liberal coalition forced a package of cuts through the Bundestag, including a cut in sick pay to 80 percent. This was a gauntlet thrown at the organised working class. West German workers had won the right to 90 percent, later 100 percent, sick pay as a result of a 114 day strike by steel workers in 1956-1957. The government's initiative gave the green light to an aggressive group of employers led by Jürgen Schrempp, boss of Daimler-Benz. Schrempp had been pushing for a style of management much more like the Anglo-American model of deregulated free market capitalism. His strategy for Daimler involved the globalisation of investments (reflected in the company's subsequent merger with Chrysler) and maximising 'shareholder value'--stock marketese for short term profits. He rammed through the cut in sick pay straight away (Kohl had promised the change would apply only to new contracts). But Schrempp had miscalculated. The fury of rank and file workers forced a fierce reaction from IG Metall, the metal trade union. Faced with a wave of strikes centred on Daimler's Bremen works, the bosses had to back down.

This defeat was simply the most decisive episode in a much broader wave of resistance to the Kohl government. For example, in June 1996 the DGB (the German TUC) organised an enormous demonstration against Kohl's cuts in the federal capital, Bonn. Attempts to move nuclear materials provoked massive confrontations between riot police and thousands of protesters. At the end of 1997 students mounted a nationwide wave of occupations and demonstrations. A piece published in Wirtschaftswoche, the German equivalent of The Economist, vividly evokes the atmosphere in the last days of the Kohl government:

Eggs crack on pavements, and fireworks explode. Thousands of miners besiege the government quarter in Bonn in defence of state subsidies for their industry... Strange scenes take place in the besieged headquarters of the FDP [the liberal junior partner in the Kohl government]. One liberal politician turns up at a window, holds up his champagne glass and sticks two fingers up at the miners. Germany 1997, a new whiff of class struggle...
This sleepy republic has never been so lively. Not a day goes by without someone somewhere taking to the streets for or against something! First there were the anti-nuclear demonstrations, then the miners, and then the building workers. This week it's the steel workers' turn... There is no doubt that things are beginning to move in this country. The rising voices of protest demonstrate this clearly. Fasten your seat belts, dear readers, it's going to get extremely turbulent!...
No political commentator in recent years has got it as wrong as Francis Fukuyama, who, after the collapse of really existing socialism in Eastern Europe, declared the 'End of History', claiming that capitalism had finally and decisively beaten all 'competing ideologies'. Socialism might have failed economically, but as a political ideal it is turning out to be extremely hard to kill.13

This process of class polarisation was not confined to Western Europe. Canada, with its strong trade unions and relatively developed welfare state, is in many respects closer in social structure to Western Europe than to the US. In 1994 a right wing Tory administration headed by Mike Harris won office in Ontario and mounted a determined assault on the welfare state. This provoked a series of one day city-wide general strikes throughout the province, the most industrialised part of the country. At its high point in October 1996, 1 million workers went on strike in Toronto, with 300,000 marching through one of North America's leading cities.

In the end this campaign was shut down by the leaders of the Ontario Confederation of Labour, allowing Harris to win re-election in 1999. The Canadian strikes, like the major European struggles, have been bureaucratic mass strikes, called and controlled by trade union leaders, though in some cases (notably the French strikes) there was a considerable degree of rank and file initiative involved as well. This did not alter the significance of what was happening: workers were beginning to recover their confidence, even if they usually were still reluctant to act independently of the trade union bureaucracy.

The main exception to this pattern was, of course, Britain. The defeats suffered by British workers during the 1980s had been much more severe than in any other major European country. However bitter they might have felt, rank and file workers lacked the confidence to act independently, while a deeply demoralised trade union leadership did everything it could to prevent strike action taking place in the desperate hope that the election of a Labour government would allow it to win the concessions for which it was unwilling to fight. The huge wave of anger that swept the country in the autumn of 1992, after Tory economic policy collapsed with the pound's expulsion from the ERM and the government announced the closure of most remaining pits, could have led to a revival in workers' struggles. This possibility vanished as the miners' leader Arthur Scargill lined up with the TUC General Council to block any attempt to mount direct action. Nevertheless, 1992 did mark a turning point. Disillusionment with the failure of Thatcherite 'popular capitalism' drove millions of working class people into the reformist camp. It was this, rather than Tony Blair's personal magnetism or New Labour's policies, that laid the basis for the Labour Party's huge election victory on 1 May 1997.14

Labour's triumph was simply the most dramatic instance of the political reversal that took place in the second half of the 1990s. The mass rejection of neo-liberalism found political expression in a wave of electoral victories for social democratic parties. Greece led the way, reflecting the intensity of social conflict in that country since the mid-1980s. After fierce class battles under the right wing Mitsotakis government in the early 1990s, Andreas Papandreou's PASOK was returned to office in 1993. The disintegration of the Berlusconi coalition paved the way for the victory of the Olive Tree coalition, dominated by the PDS (the Party of the Democratic Left, formerly the Communist Party), in the Italian general elections of April 1996.

In 1997-1998 the pace speeded up. First came the election of the first Labour government Britain had seen in 18 years. Then came the unexpected triumph of the 'plural left' in the French legislative elections of May-June 1997. Finally, the German federal elections at the end of September 1998 brought the Social Democratic Party (SPD) back to office for the first time in 17 years. The defeat of Helmut Kohl, the longest serving German chancellor since Bismarck, allowed Gerhard Schröder to form a 'Red-Green' coalition. In the aftermath, the Financial Times found itself ruefully weighing the consequences of what it called 'Europe's Red October', now that 'the centre-left is back in power in 13 of the EU's 15 states'.15

The French and German electoral victories took place in a significantly different context from that in Britain. Blair's path to office was smoothed by the memory of shattering defeats suffered by the British working class in the 1980s. Demoralised activists were willing, more or less reluctantly, to accept New Labour policies as the price of victory. But in Germany, as we have seen, the working class remains strong and undefeated. Kohl's failure to deliver the neo-liberal 'reforms' demanded by big business meant that in the run-up to elections the German establishment put their hope in a tied result. This would then permit the formation of a 'Grand Coalition' of the SPD and the CDU (Christian Democratic Union, the main conservative party) to force through these 'reforms'.

In the event, the swing to the left was far too pronounced for this. In Schröder the SPD chose a chancellor candidate very much in the Blairite mould. He underlined his pro-business credentials, having, as state premier of Lower Saxony, served on Volkswagen's supervisory board, and had himself photographed ostentatiously smoking a cigar to recall images of Ludwig Erhard, the CDU architect of the 'economic miracle' of the 1950s. Schröder's spin doctors coined the slogan of Die neue Mitte--the new centre--to indicate his break with traditional social democratic politics.

But the atmosphere in German society forced to the SPD in the course of the campaign to place its main emphasis on what amounted to an 'Old Labour' programme of social reform. This reflected the character of the SPD itself as a traditional social democratic party with deep roots in a strong organised working class based in one of the biggest and most successful industrial economies in the world. Perry Anderson noted:

The SPD is not in thrall to its chancellor. It is a very different party from New Labour. Twice the size, with 700,000 individual members, its culture remains noticeably working class. The atmosphere of an SPD rally in any big industrial town is closer to Labour meetings of the 1960s or 1970s than to anything in Britain today.16

This was reflected in the fact that the SPD chairman was not Schröder, but Oskar Lafontaine, left reformist state premier of the Saarland, a powerful orator trusted by the party rank and file. Having won the party leadership after the SPD's last defeat in 1994, Lafontaine conceded to the media friendly Schröder the chancellor candidacy in order to ensure electoral victory in 1998. But he continued to express his vocal opposition to free market economics, writing a book with his wife called Don't Be Afraid of Globalisation. Anderson predicted optimistically soon after the Red-Green coalition was formed, 'As minister of finance, and chairman of the SPD, his position in the new regime is unusually strong. Lafontaine is the first Western politician of aggressively Keynesian outlook in 25 years'.17

Lafontaine's apparently powerful position in the new government was indicated by the decision of Schröder's nominee for economics minister, the successful computer entrepreneur Jost Stollman, to bow out during the preliminary coalition negotiations, complaining that the government was going to be more left wing than he had expected. Moreover, the participation of the Greens brought into the foreign ministry Joschka Fischer, a veteran of the Frankfurt far left in the 1960s and early 1970s. The media declared that the generation of the 1960s had taken office.

The new government was thus a coalition in more than one sense, since it involved not merely the Reds and the Greens, but, within the SPD itself, the dual leadership of Schröder and Lafontaine. The left wing character of the government was underpinned by an apparently significant electoral shift. In the 1994 federal elections Kohl had been saved by the support for the CDU in the 'new Länder' in eastern Germany. By 1998, however, the experience of economic collapse had turned the east against Kohl. This benefited not merely the SPD, but also the Party of Democratic Socialism (PDS)--the old Stalinist ruling party in East Germany, which had successfully converted itself into a left reformist organisation that took over 20 percent of the vote in the east in 1998. The combined share of the vote of the SPD, Greens and the PDS was 60.3 percent in the east, compared to 50.6 percent in the west. Anderson observed, 'What we are looking at, then, is the potential emergence of a long run sociological majority for the left in Germany'.18

Similarly in France, Jospin had to respond to a political climate reflecting considerably more working class militancy than Blair had to deal with. He was therefore careful to differentiate himself from the Blairite 'Third Way'. Jospin declared himself in favour of 'a market economy' but not 'a market society'. Soon after taking office he said, 'If market forces are allowed to let rip, it will spell the end of civilisation in Western Europe'.19 Jospin's 'plural left' coalition government included not merely the Greens but the PCF, which is, rhetorically at least, much further left, for example opposing the euro. The centre of gravity of the new governments in France and Germany was thus well to the left of New Labour.

Lafontaine's fall, Schröder's crisis

Yet the past year has exposed the fundamental contradiction in the revival of European social democracy: brought to office by mass rejection of neo-liberal policies, the reformist governments have nonetheless continued with these policies. This contradiction is most flagrant in Britain where, within days of taking office, Blair and his Chancellor of the Exchequer, Gordon Brown, conceded a fundamental monetarist demand by giving the Bank of England control over interest rates.

The phenomenon is, however, much more general. The commitment of social democracy to administering the existing system was clearly demonstrated during the Balkan War, when the German and French governments proved themselves to be as determined supporters of NATO's bombing campaign as Tony Blair or Bill Clinton. Blair was able to boast that this was a war waged by 'a new generation of leaders in the United States and in Europe...who hail from the progressive side of politics'.20 Indeed, despite Blair's posturing, French aircraft were more heavily involved in the bombing than the Royal Air Force. Joschka Fischer even proclaimed the war an anti-fascist struggle like the Spanish Civil War.

Moreover, on 11 March 1999, shortly before the outbreak of the Balkan War, Lafontaine suddenly resigned as finance minister and SPD chairman. His departure opened the door for the Red-Green government to shift towards a New Labour agenda. Symbolically enough, Schröder was on the way to a press conference to launch the German edition of Anthony Giddens's Blairite tract The Third Way when he learned of Lafontaine's resignation. No sooner was the war over than Blair and Schröder launched a policy document entitled The Third Way/Die neue Mitte. Drafted by Peter Mandelson and his German counterpart Bodo Hombach, it called for a neo-liberal package of welfare 'reforms', 'flexible' labour markets and the like.

Schröder followed this up with an effort to show big business that he would cut the massive almost DM1,500 billion government debt he had inherited from Kohl. In June 1999 Lafontaine's successor as finance minister, Hans Eichel, unveiled a package of DM30 billion (£10 billion) of impeccably Thatcherite spending cuts. Pensions would rise in line with the rate of inflation, and not, as previously, the increase in earnings. Civil service pay would be similarly capped, while corporation tax would be cut from 35 to 25 percent.

This reversal reflected determined pressure from the ruling class. From the start, the bosses and the right wing parties mounted concerted opposition to key reforms. The first such case was provided by the new government's effort to reform a racist citizenship law inherited from the Wilhelmine era that ties nationality to German descent. The government's proposal to extend citizenship to those of foreign descent by allowing for dual nationality was challenged in particular by Edmund Stoiber, state premier of Bavaria and leader of the CDU's ultra-conservative Bavarian partner, the Christian Social Union (CSU). Bucking the national trend, the CSU won an absolute majority in the 1998 Bavarian state elections using the slogan, 'Germany is not a country for immigrants.' Stoiber mounted a vicious campaign against the dual nationality bill. He threatened a 'march on Berlin' and cleverly appealed to mass discontent over economic issues such as employment. Thus Stoiber attacked what he called the 'caviar faction', who supported the new law while ignoring ordinary people and their problems.

In February 1999, marking the beginning of a disastrous cycle of reverses at the polls, the Red-Green governing coalition lost the state elections in Hessen (which includes the key financial centre of Frankfurt). This was rapidly followed by a government retreat over dual nationality, led by Lafontaine. Schröder declared that the government must avoid 'minority subjects'. Soon afterwards a promise to phase out nuclear power stations was abandoned, with Schröder publicly overruling the Green environment minister, Jürgen Trittin.

But much more spectacular, and apparently decisive, was the fall of Lafontaine. The Financial Times greeted his appointment as finance minister with apprehension as marking 'the return of neo-Keynesian economics'.21 As soon as he took office Lafontaine launched a public campaign to persuade the Bundesbank and the European Central Bank to cut European interest rates. The Red-Green coalition took office at a crucial conjuncture--the financial panic of autumn 1998 and the launch of the euro in January 1999. The tight money policies pursued by the Bundesbank since 1991 and generalised throughout Europe by the convergence conditions for the euro kept Germany, and therefore continental Europe, in recession for much of the 1990s. The president of the European Central Bank, Wim Duisenburg, promised a continuation of these policies. His reaction to the autumn 1998 panic was to deny that there was a crisis: 'We will see about a crisis if that event arrives'.22

In line with his Keynesian outlook, Lafontaine pushed hard for interest rate cuts to revive the European economy. He also argued that target zones linking the major currencies--the dollar, the yen, and the euro--would secure greater global financial stability. Despite the fact that elsewhere central banks were following the lead of the US Federal Reserve Board and cutting interest rates, Duisenberg and the Bundesbank fiercely resisted Lafontaine's demands. The supposedly 'neutral' and 'independent' ECB made its political point by waiting till April 1999, after Lafontaine's resignation, before cutting interest rates by half a percentage point.

Lafontaine also infuriated British Tory Eurosceptics by calling for EU tax harmonisation, provoking the famous front page in The Sun, 'Is This The Most Dangerous Man In Europe?' German bosses would have undoubtedly replied, 'Yes.' Their ire was provoked by Lafontaine's plans to lighten the tax burden on the mass of wage earners, and thereby to promote higher consumer spending that would help revive the economy. As part of this package he proposed scrapping corporation tax reliefs. This proposal absolutely enraged German big business. Leading companies threatened to move their operations abroad. A remarkable article by the veteran Financial Times journalist John Plender in early March 1999 was headlined 'Bosses To The Barricades'. Plender quoted a study by the Institute for Fiscal Studies which showed that the tax burden on German big business was relatively light: 'In mid-decade, Germany had the lowest level of corporate income tax revenues as a percentage of gross domestic product in the group of seven leading industrial countries.' The furious reaction reflected a broader feeling by Germany's bosses that they were under pressure--thus many had been angered by the relatively generous 3.6 percent pay increase won by metal workers in February. Plender explained:

The revolt is, in reality, as much about clipping Mr Lafontaine's wings as tax. Business and the stock market are concerned that he is enfeebling corporate Germany and damaging the credibility of the European Central Bank with his ineffectual economic policies and crude lobbying for lower interest rates. A letter leaked this week revealed that a group of 22 bosses has been trying to persuade Gerhard Schröder...to rein in the maverick and unreconstructed minister.23

Within a week of that article appearing Lafontaine was out of office. His resignation was so abrupt that it invited speculation that either personal or political blackmail had been involved. But whatever the precise mechanics of Lafontaine's downfall, as the Financial Times rightly put it, 'The leaders of German industry have claimed their scalp.' The paper compared the affair with Mitterrand's U-turn in the early 1980s, when, under pressure from the financial markets, he abandoned the left-Keynesian platform on which he had been elected and replaced it with neo-liberal policies: 'Mr Mitterrand's government had two years in power before executing its volte face. Mr Lafontaine concertina'd that process into little more than four months before his politics met the combined resistance of the European Central Bank and German businesses threatening to switch to locations elsewhere'.24

After Lafontaine's fall the Red-Green coalition seemed set firmly on a Blairite course. Schröder's two key initiatives in June 1999, in the immediate aftermath of the Balkan War--the joint policy document he signed with Blair and the spending cuts package--reflected his confidence in his ability to pursue the politics of die neue Mitte. He took over the party chairmanship and imposed his own candidate as SPD general secretary. Within the government Schröder's hand was strengthened by the evolution of the Greens under Fischer's leadership towards the espousal of aggressively neo-liberal policies.

This proved, however, to be a false dawn for the German version of the Third Way. Ironically for a chancellor selected for his vote winning qualities, Schröder suffered a series of devastating electoral defeats after Lafontaine's resignation. First came the European parliamentary elections in June 1999, where the SPD's vote fell to 30.7 percent, 1.5 percentage points lower than its performance in the previous elections in 1994 and over 10 points lower than its share of the votes in the federal elections nine months before. The CDU/CSU's share soared to 48.7 percent of the poll. Then, in the early autumn of 1999, the SPD lost no less than five successive state elections. Four of these polls took place in eastern states where voters had swung massively to the SPD in 1998. Anderson's 'long run sociological majority for the left' seemed to be withering on the vine. But the disaster wasn't confined to the east. Lafontaine's old stronghold of the Saarland, on the French border, also fell to the right wing tide. And in municipal elections in the largest state, North Rhine Westphalia, the CDU became the leading party in such traditional SPD strongholds in the industrial Ruhr as Dortmund, Düsseldorf and Cologne. Schröder's personal popularity plummeted till he was trailing behind his conservative rival in the opinion polls. He faces the real possibility of losing the next federal elections in 2002. In the short term the electoral defeats mean the government has lost control of the upper chamber of the German parliament, the Bundesrat, which is composed of state representatives. The CDU now has a veto over many government policies.

It would, however, be too simple to see the Red-Green coalition's electoral collapse as reflecting a swing to the right in German society. True, in the arena of national bourgeois politics the CDU has been the main beneficiary. Nazi parties have also made some important gains. Thus the fascist Deutsche Volksunion won 5.3 percent of the vote in Brandenburg. But the polarisation has been to the left of the SPD as well. The PDS won 23.3 percent of the vote in Brandenburg, up five points on the previous election. It forced the SPD into third place in Thuringia and increased its vote in Berlin to 17.8 percent. The PDS is a complicated formation. It retains the loyalty of a section of the east German middle class, based mainly in the public sector, who feel their situation has deteriorated since reunification. Unlike the SPD, it lacks any organic links with the trade unions. But this has given the PDS leadership the freedom to present itself as significantly to the left of the SPD (though when in state coalition governments with the SPD it pursues essentially the same policies as the social democrats). Nevertheless, the left wing positions the PDS takes (for example, it was the only parliamentary party that opposed the Balkan War) have allowed it to pick up the votes not merely of disgruntled working class people, but of radical youngsters in the west.

The successes achieved by the PDS indicate that the main driving force in the SPD's electoral collapse has been the bitterness and disillusionment caused by Schröder's failure to break with Kohl's policies. In August 1999, 4.1 million people were unemployed, 10.5 percent of the workforce--a higher figure than when the Red-Green coalition took office. Many working class voters have reacted to the absence of real change by staying at home or voting for the PDS.

The same impatience has been reflected within the SPD as well. The Blair-Schröder document and the cuts package provoked widespread anger among party and trade union activists. Forty left wing SPD deputies issued a statement denouncing Schröder's 'reforms', and demanding a restoration of the link between pensions and earnings and the reintroduction of the wealth tax that Kohl had scrapped in 1997. The government was forced onto the defensive. 'We have spent the whole summer talking about the injustices of the savings package,' finance minister Eichel ruefully admitted.25

Schröder's situation was exacerbated when Lafontaine emerged from his self imposed silence to denounce the government's new course. In an interview in late September 1999 in the Welt Am Sonntag newspaper he blamed the election defeats on the SPD's failure to continue with his economic policies. Lafontaine followed this up with a book, The Heart Beats on the Left, in which he gave an insider's view of the first few months of the Red-Green government and denounced Schröder's politics and leadership style. This assault provided a focus within the workers' movement for left wing opposition to New Labour style policies. Meanwhile, the sharp shift to the right by the Green leadership was provoking bitter opposition from party activists.

By October, a somewhat punch drunk Schröder seemed to be wondering publicly whether he had been right to hitch up to the Blairite bandwagon. On a television talk show he conceded that it had been a mistake to rush out his joint policy document with Blair without any internal party discussion. SPD general secretary designate Franz Münterfering played down the document's significance, saying that it had no 'direct concrete consequences' for government policy.26 Behind the difficulties confronting the Red-Green coalition lies the fundamental fact that it had to deal with a relatively strong and undefeated workers' movement. The highly intelligent neo-liberal commentator Martin Wolf summed up the problem when he reviewed the prospects for the government after Lafontaine's resignation. Criticising Schröder for abandoning many of Kohl's free market 'reforms', Wolf nevertheless discounted the possibility of his successfully pursuing Blairite policies: 'Under the liberalising alternative a left of centre German government would introduce even more radical reforms than those it has already reversed. This will not happen. It is all very well for Tony Blair to suggest it should. But even his government is merely the beneficiary of its predecessor's efforts'.27

In other words, to borrow another formulation of Tony Cliff's, Schröder has to be both the German Thatcher and the German Blair. Blair has been able to build on the Tories' successes in weakening the organised working class. Schröder, by contrast, confronts a working class with no such recent memory of bitter defeat--indeed, a class whose militancy has been growing in recent years. This puts important limits on his freedom of action. Hence even the joint document with Blair stresses the importance of 'partnership' between workers and bosses in the shape of Schröder's Alliance for Jobs with the trade unions (formulations to which Mandelson strongly objected). Despite the ties of loyalty binding German workers to the SPD and therefore to the government, Schröder will encounter massive resistance if he seeks seriously to dismantle the welfare state. He faces a task of Herculean proportions.

Polarisation within the reformist camp

These developments in Germany are one instance of a more general phenomenon in Western Europe--polarisation within the reformist camp. The new social democratic governments have generally failed to break with the neo-liberal policies of their right wing predecessors. Nevertheless, because these governments were brought to office by a shift to the left in society at large, usually reflecting a revival in workers' struggles, the disillusionment produced by their policies has not caused a simple swing of the pendulum back to the right, or even to the far right. There have been some gains for fascist or semi-fascist parties--most notably in the Austrian and Swiss elections. These represent, however, more a warning for the future than an immediate threat.

The dominant feature of the present situation is rather a process of division that is taking place among the supporters of the reformist government, in which a section of the working class begins to look further to the left. This can be seen even in Britain. Though the Tories won the Euro elections, they did so not because of a revival of their popularity (on the contrary, under William Hague's leadership they moved fast towards becoming a loony right ultra-Thatcherite nationalist party), but because of massive abstentions by traditional Labour voters. In the Scottish and Welsh elections in May 1999 New Labour came under severe pressure from nationalist parties presenting themselves as more left wing than the government: heartland Labour seats in the mining valleys of the Rhondda fell to Plaid Cymru, while the Scottish Socialist Party won a seat in the new parliament in Edinburgh.

The same process is much more developed on the continent. As we have seen, in Germany disillusionment with Schröder has taken the form of both polarisation within the SPD itself and a swing by voters to the PDS. But it is in France, where the mass radicalisation has been greatest, that social and political tensions have become most pronounced. Despite his more radical rhetoric, Jospin's policies have often not been that different in practice from those of Schröder or Blair. A mildly Keynesian economic policy has allowed public spending to rise to boost domestic demand and counteract the effects of the Asian and Russian crises. But in June 1999 the Financial Times could comment, 'The Jospin government has been able to privatise more in two years than any of its predecessors, even selling off flagship state entities such as Air France and France Telecom'.28

As for the government's key reform, the introduction of a 35 hour week, the journalist Robert Graham commented on the revised bill unveiled that same summer by the social affairs minister, Martine Aubry, 'The new law incorporates major concessions to business.' For example, within an overall annual ceiling of 1,600 working hours per employee, 'Companies can negotiate with unions over how these hours are to be spread over the year. Already this is becoming a lever to introduce changes in work patterns.' Thus Carrefour, the biggest supermarket chain, has used the law to introduce such 'Anglo-Saxon' productivity raising practices as teamworking: 'The company chooses not to emphasise the word, but the 35 hour week has enabled it to introduce flexibility in all but name'.29

Jospin--a much cleverer politician than either Blair or Schröder--has nevertheless been much more careful to use traditional social democratic language to keep his supporters happy. Thus he ostentatiously refused to endorse the Blair-Schröder document. His caution reflects the climate of social conflict that reigns in France today. The struggles unleashed by 1995 have not ceased under Jospin. Thus barely had he been elected than he had to confront a highly embarrassing wave of occupations mounted by unemployed activists and their supporters.30 Different struggles and movements have proliferated. Twice in the past six months, for example, high school students have taken to the streets in their hundreds of thousands.

This social ferment has produced a revitalised and diverse left. One political scientist distinguished no less than four lefts around the government. The first, 'social-liberal', grouping, represented by the right wing of the Socialist Party, accepts the neo-liberal pensée unique: it is the closest thing in France to the Blairite Third Way. But this tendency is much weaker and more isolated than its British or even its German counterparts. The second, 'neo-Keynesian', grouping supports Jospin's own position, summed up by the ambiguous slogan, 'Yes to the market economy, no to the market society.' Thirdly, there are 'national republicans' like interior minister Jean-Pierre Chévènement, leader of the Mouvement des Citoyens, and the philosopher Régis Debray, who champion French national sovereignty against the US, the EU and multinationals (both opposed the Balkan War, though Chévènement did not resign from the government). Finally, there is the 'radical' left--the Communist Party, Bourdieu, the main far left organisations Lutte Ouvrière and the Ligue Communiste Révolutionnaire, the militant SUD (Solidaires, Unitaires, Démocratiques) unions, and various activist coalitions supporting the sans-papiers, the unemployed, and so on.31

As this description shows, the revived left involves more than formal political groupings and organisations. A plethora of different single issue campaigns have grown up in the past few years. There are also various journals, notably the monthly Le Monde diplomatique, and intellectual groupings--for example, Raisons d'agir, founded by Bourdieu in December 1995--which help to sustain a critique of neo-liberal 'globalisation'. This is a climate where opposition to what is seen as the US-dominated World Trade Organisation (WTO) and support for measures to regulate global financial markets--for example, the so called Tobin Tax on speculative transactions--is growing. Groupings such as the Association pour la taxation des transactions financières et l'aide aux citoyens (Attac), supported by both left reformists and the far left, and some trade union leaders, are campaigning against any extension of the World Trade Organisation's powers.

At the same time, French capitalists are increasingly asserting themselves. Even if the big firms can use the Aubry law introducing the 35 hour week to their advantage, small and medium employers lack the same room for manoeuvre. And the climate described above creates pressure for reforms that represent unwelcome restrictions on all French bosses' freedom of action. Ignoring the parliamentary conservative parties, still in profound disarray after successive electoral routs, the French employers have been taking direct action: a claimed 25,000 bosses marched through Paris on 4 October to protest against the 35 hour bill.

Caught between pressure from an increasingly angry and militant bourgeoisie, and the various left wing currents and workers' organisations, Jospin has been forced to tack and turn. At the beginning of September, Michelin caused a furore by announcing 7,500 redundancies. On 13 September, Jospin told a television interviewer that his government could do nothing about large scale job cuts announced by Michelin: 'You can't expect everything from the state,' he said.32 Within barely a fortnight, the angry reaction within the workers' movement had forced Jospin to withdraw this confession of impotence. Unveiling a new government programme, he declared: 'Globalisation doesn't make states impotent. Economic policies can have a major impact on economic developments... The state must arm itself with new instruments of regulation, adapted to the realities of capitalism today'.33

Later that autumn, the growing social and political tensions over the Aubry law spilled over onto the streets, first with the bosses' demonstration on 4 October. The left's riposte came on 16 October, as 60,000 responded to the Communist Party's call to demonstrate against unemployment. This call represented a gamble on the part of the PCF leader Robert Hue. The Financial Times might praise him as 'a model of compromise', but the PCF still had to maintain control of its working class base.34 In the Euro elections the PCF share of the vote fell to just under 7 percent, while the Greens took 10 percent, and the joint list of Lutte Ouvrière and the Ligue Communiste Révolutionnaire won 5 percent.

Faced with this challenge from the left the PCF had to demonstrate its strength--particularly since the CGT, the trade union federation long associated with the party, refused to back the 16 October march. In the event the gamble paid off, as PCF supporters dominated a large and confident working class demonstration that also included sizeable contingents from the far left. But--reflecting the other face of Hue's strategy--the day before the demonstration PCF deputies in the National Assembly voted for a revised version of the Aubry law that embodied only minor concessions to the left. Aubry's spin doctor claimed, 'The amendments are not the fruit of haggling since the equilibrium of the text has been perfectly preserved'.35

The polarisation over the Aubry law suggests that there will be more social confrontations. Having taken to the streets once, the bosses may seek to move onto a wider offensive. They may, however, find themselves blocked by the response from the organised working class. Fuelled by higher public spending, the French economy is projected to grow by 2.8 percent next year. According to the Financial Times, this 'should be higher than Germany and Italy, the other two big eurozone economies, which have been harder hit by the Russian and Asian crises and have been slower to recover'.36 Relatively high growth is likely to boost the confidence of a workers' movement that has enjoyed significant victories in the past few years. The French bourgeoisie will not find it easy to regain the initiative.

Left reformist challenges to the main social democratic parties have also emerged elsewhere in Europe. In Italy Rifondazione Communista, whose core support comes from former Communist Party activists who opposed its transformation into the PDS, won 8.6 percent of the vote in the 1996 parliamentary elections.37 In Greece, where since becoming prime minister in 1995 Costas Simitis has pursued New Labour style policies, the 1999 European elections saw voters react strongly. PASOK's share of the vote fell to 32.9 percent of the vote, behind the conservative New Democracy's 36.3 percent. Three left reformist parties, however, saw their votes rise. The Communist Party won 8.5 percent of the vote, DIKKI, a left wing breakaway from PASOK 6.9 percent, and the ex-Communist Left Coalition 5 percent. Between them the three parties now have seven MEPs compared to PASOK's nine.38

Conclusion

The growth of left reformism is no reason for complacency. Whether within established social democratic parties or organisationally separate from them, it represents a revival of the politics of traditional reformism--of what Blair likes to denounce as 'Old Labour'. This is a politics that failed when to put the test during the earlier stages of the present period of crises in the 1970s and 1980s, whether under Harold Wilson and James Callaghan in Britain, Willy Brandt and Helmut Schmidt in West Germany, or François Mitterrand in France. Lafontaine's abrupt resignation after a few months of media attacks was hardly heroic when one considers the intense vilification that Tony Benn suffered for ten years, let alone the fate of Salvador Allende, who died fighting in his presidential palace. Indeed, the affair highlighted the fundamental weakness of reformist politics--namely its reliance on a state apparatus that capital can bend to its will. Therefore the calls put forward by Jospin and Lafontaine for the 'regulation' of capitalism hardly amount to a serious challenge to an economic system whose inner logic drives it towards exploitation and crisis.

This does not alter the significance of the process of polarisation described above. The experience of neo-liberal policies has pushed the working class throughout Europe back towards social democracy. The failure of the resulting governments to abandon their predecessors' policies has produced a further reaction, in which a section of workers want to go further. This has breathed new life into left reformism. Even though the solutions it offers are quite inadequate, the resulting debates are of immense importance. There is a sense in which the Blairites, by going on the ideological offensive and seeking to force the pace of 'modernisation' on a European scale, have helped to feed the reaction to the left. Key New Labour texts such as Giddens's The Third Way and the Blair-Schröder document have become a focus of debate right across Europe. Moreover, social radicalisation has stimulated the emergence of more militant left reformist currents--most notably that associated with Bourdieu in France. The result is the emergence of analyses and arguments that in certain respects--in particular the critique they involve of deregulated liberal capitalism--converge with those of the classical Marxist tradition. This represents an important opportunity for revolutionary socialists to break out of the intellectual isolation in which they have been confined for the past two decades, provided that they engage with these currents in a way that is both sympathetic and, where necessary, critical.39

It is therefore crucial that revolutionary socialists intervene in these debates. This requires more than producing theoretical critiques of the Third Way, though these are important. More concrete initiatives are also required, depending on the strength and circumstances of the organisation concerned. For example, the sister organisation of the SWP in Germany, Linksruck, has intervened strongly in support of Lafontaine's challenge to Schröder around the slogan 'Oskar is right'. The Socialist Workers Party in Britain is campaigning in support of Ken Livingstone's bid to become Labour candidate for mayor of London: the Labour Party leadership's attempts to block him have made him a focus for discontent with New Labour.

The starting point for such initiatives has to be unity against the bosses and against right wing social democracy. This does not mean, however, that support for left reformist challengers such as Lafontaine and Livingstone can be uncritical (particularly in the light of the latter's support for the Balkan War). On the contrary, within the framework of unity against Blair, Schröder and their ilk, friendly arguments should be raised about the limits of left reformism: thus Linksruck criticises Lafontaine for advocating the regulation of capitalism rather than its replacement by a socialist planned economy based on workers' control. Where this fits the situation of the organisation concerned, revolutionary socialists should be willing to take their challenge to both right and left social democracy into the electoral arena. Thus the Greek Socialist Workers Party (SEK) ran a slate in the Euro elections of June 1999, while the British SWP stood candidates in the Scottish and Welsh elections: both these initiatives enjoyed modest successes that justified the experiment (the Irish SWP has also made some successful electoral initiatives in recent years).

Whatever form it takes, it is essential that revolutionary socialists move to take advantage of the opportunities offered by the polarisation within the reformist camp. The metaphor of 'the 1930s in slow motion' implies that the pace of the crisis is slower today than it was during the Great Depression. In my original analysis, I stressed the reasons for this difference--most notably that the economic crisis today is still far less severe than it was in the 1930s, bourgeois democracy has much stronger social roots in continental Europe than existed in the inter-war era, and the fascist parties have so far been more successful at winning votes than building mass paramilitary movements.40

But the film of the 1930s is running, albeit more slowly. The cumulative effect of long term economic stagnation and mass un employment--the jobless rate in Germany and France seems stuck at between 10 and 12 percent, condemning millions to poverty and despair--is putting enormous pressure on existing social and political structures. If a credible left wing alternative does not emerge, then disillusionment with social democracy's capitulation to the market, particularly if it coincides with the next world recession, will strengthen the far right. The National Front in France, for example, is weakened, but far from finished. The Austrian and Swiss elections are thus a timely warning. Revolutionaries can and must make a decisive difference to whether such a real socialist alternative does develop.